Business Environmental Analysis: Retail Industry Analysis Report

This report provides a comprehensive business environmental analysis of the retail industry. It begins with an introduction to the use of Porter's Five Forces, SWOT, and PESTLE models for understanding the market environment and building strategies. The report then offers a background on the retail industry, highlighting its growth driven by e-commerce and social media, and presents comparative micro-factor analyses of two companies, TESCO and Woolworths, using SWOT analysis to evaluate their strengths, weaknesses, opportunities, and threats. The report applies Porter's Five Forces model to the retail industry, assessing competitive rivalry, supplier and buyer power, and the threat of new entrants and substitutes. Finally, it concludes with recommendations for business diversification and expansion into emerging markets to boost marginal incomes, addressing the industry's increased competition. The report includes references to relevant literature and an appendix with supporting data.

Running head: BUSINESS ENVIRONMENTAL ANALYSIS
BUSINESS ENVIRONMENTAL ANALYSIS
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BUSINESS ENVIRONMENTAL ANALYSIS
Introduction
The organizations consider using Porter’s five force model, SWOT assessments and
PESTLE with the purpose of improving their understanding of the market environment and
anticipate different challenges that might be encountered while doing business. Therefore, the
utilization of the models and assessment tools supports the organizations in improving their
strategy building competencies.
Background of the retail industry
The retail industry is encountering growth through the development of different e-
commerce and social media platforms. The shift from the formalized mortar and brick stores to
the online presence have significantly contributed to the growth of the global retail industry. The
global retail sales have increased considerably from US$22.97 trillion in 2017 to US$ 25.04
trillion in 2019 and is still expected to grow to US$29.76 trillion by 2023 (Statista 2020). Active
participation of Woolworths, TESCO, Sainsbury’s and the like in the retail industry have
significantly contributed to the exponential growth and expansion (Sousa et al. 2019). The
companies provide the customers with a wide range of groceries and general merchandise, which
have improved in the years, correlating to the changing taste and preferences of the customers.
Comparative micro factor analysis of 2 companies in the retail industry
Strengths Weaknesses
TESCO
 Leading
market share
 Diversified
Woolworths
 Market
leadership
 Employee
TESCO
 Decrease in
operating
profits annually
Woolworths
 Price wars
with Coles
 Increased

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BUSINESS ENVIRONMENTAL ANALYSIS
stores
 Superior use
of
technologies
 Improved
product range
policies
 Effective
understanding
of the customer
demands
 Effective
promotional
campaigns in
the different
markets
 Low cost
strategy
increasing
operational
expenses
operational
expenses
 Declining
marginal
income
 Confusion
in
positioning
the
propositions
in the
different
markets
Opportunities Threats
TESCO
 Strategic
alliances with
other existing
brands
 Expansion in
the emerging
markets
 Development
Woolworths
 Focusing on
improving the
experience of
the customers
through
implementing
AI
technologies
TESCO
 Threat from the
changing
context of the
political
situation in
Britain through
Brexit
 Change in the
Woolworths
 Increased
competition
in the
markets
 Threat of
new
entrants and
substitutes

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BUSINESS ENVIRONMENTAL ANALYSIS
in the online
shopping
platforms
 Introduction
of new
products and
product
diversificatio
n
 Expansion in
the emerging
economies
labor laws
 Change in the
preferences of
the customers
 Intensified
competition
are growing
Source: Luo et al. (2019)
Recommendation
The organizations might take the initiative of diversifying their propositions and making
expansion in the new emerging markets with the purpose of boosting their marginal incomes.
Diversified products and markets would allow the ventures in widening the scope of sales and
avoid intensified market competitions.
Porter’s five-force analysis of retail industry
Competitive rivalry
(Strong force)
The retail industry encounters an intensified
competition due to the active involvement of
companies Woolworths, Coles, Sainsbury’s,
Tesco and the like
Bargaining power of the suppliers The bargaining power of the suppliers are
comparatively lower in the retail industry due

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BUSINESS ENVIRONMENTAL ANALYSIS
(Weak force) to the involvement of large number of
suppliers providing similar propositions
Bargaining power of the buyers
(Strong force)
The bargaining power of the buyers are high
due to the presence of competitive companies
providing similar propositions. The lower
switching costs have also empowered the
bargaining power of the customers in the
different markets
Threat of new entrants
(Weak force)
The retail markets encounters a lower threat
of new entrants as it holds a huge initial
investment that cannot be afforded by most of
the organizations
Threat of substitution
(Moderate force)
The threat of substitutes are moderate as the
propositions might be developed by small
scale manufacturers. However, the higher cost
of operations might restrict the capabilities of
the small scale manufacturers in gaining a
significant market control
Source: Sivitanides (2017)
Conclusion
Therefore, from the above assessment it might be stated that the retail industry is a
booming industry with increased scope of expansion based on changing buyer behavior.
However, the increased scope has also increased the market competition. Therefore, companies

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BUSINESS ENVIRONMENTAL ANALYSIS
are required to undertake market assessments for recognizing the market situation and
developing credible strategies for growth.

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BUSINESS ENVIRONMENTAL ANALYSIS
References
Luo, G., He, Y., Zhao, C., Zhang, X., Lin, S. and Zhao, Y., 2019, November. Coordinated
Wholesale and Retail Market Mechanism for Providing Demand-side Flexibility. In 2019 IEEE
Sustainable Power and Energy Conference (iSPEC) (pp. 2569-2574). IEEE.
Sivitanides, P., 2017. Retail market analysis for development projects: Coping with new frontiers
in retailing. In Routledge Companion to Real Estate Development (pp. 94-104). Routledge.
Sousa, T., Fallahi, E., RadoszynskiI, A. and Pinson, P., 2019. Feasibility study on the adoption of
peer-to-peer trading integrated on existing retail market and distribution grid.
Statista, 2020. Total Retail Sales Worldwide 2017-2023 | Statista. [online] Statista. Available at:
<https://www.statista.com/statistics/443522/global-retail-sales/> [Accessed 19 March 2020].

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BUSINESS ENVIRONMENTAL ANALYSIS
Appendix
(Source: Statista, 2020)